News article

7 March 2017

As we await the Chancellor's Budget, business confidence among food and drink
manufacturers has declined, driven by increased input costs, squeezed profit
margins and uncertainty over Brexit terms, the latest survey from the Food and Drink Federation (FDF) reveals. However, the sector continues
to see opportunities for growth.

FDF, the voice of the UK's largest manufacturing sector – food and drink
– is
therefore calling on the Chancellor to help offset these challenges with
concrete
measures to support food and drink exports and to support R&D investment.

Nearly half of respondents (41 per cent) to FDF's survey of members –
large and
small – are less confident about the UK's business environment than when
last
polled in October 2016.

An overwhelming majority (90% per cent) have seen the price of ingredients and
raw materials increase in recent months. They expect these costs to continue to
rise over the next two years. Nearly two thirds (65 per cent) have seen a
negative impact on their already tight product margins during this period.

However, food and drink manufacturing continues to be resilient and resourceful.
FDF's survey found that producers intend to offset the immediate and long-term
challenges by growing volume sales primarily in the domestic and non-EU
markets.
Nearly two thirds (64 per cent) of respondents expect to see their UK sales
volumes increasing in the next two years. In 2016, food and drink exports
smashed
the £20bn barrier for the first time. Nearly two thirds of companies (63
per
cent)
surveyed expect their exports to non-EU countries will increase, with many (40
per cent) also expecting to target export growth in the EU market.

Additional support should be provided to prepare and up-skill existing and
would-be food and drink exporters. FDF is asking for funding for a pilot 'Food
and
Drink Export Academy' to address the lack of export training in England.

Incentives to encourage companies to base their R&D hubs in the UK, either
through financial measures or ease of operation, will help make the UK a world
leader
in innovation.

Changes to the R&D tax credit mechanism which foster innovation will make it
easier for SMEs to access available support.

Measures which create a consistent Brexit, provide as stable a business
environment for manufacturers as possible, and aid business planning.

“Almost half of our members are less confident in the prospects for
business
than they were four months ago. That is driven by ingredient price rises and
from
already tight margins being squeezed still further as competition continues to
rage between the supermarkets.

“But it's a mixed picture. Nearly two thirds of members expect to see
sales in
the UK grow over the coming months. The same number see sales outside the EU
growing too. We also know around half of our members expect sales within the EU
to
grow, so they're optimistic about their future while worrying about the trading
environment.”

Notes:

FDF and FDEA (Food and Drink Exporters Association) are currently working
together on more developed plans for an export academy.

FDF has provided feedback to the Treasury's review of the R&D tax credit
system.
FDF is seeking a more flexible approach which makes it easier for companies to
access grants for innovation, whether that's to bring nutrition, environmental
or
efficiency/ productivity benefits. Often food and drink manufacturers are not
aware of the support they can access from Government, and these companies
self-fund three quarters of R&D in the sector.

Please contact the FDF press office should you require a spokesperson to discuss
how the budget announcement may affect food and drink manufacturers moving
forward.